Toronto’s robo-advisors on a mission to MaRS

Toronto’s robo-advisors on a mission to MaRS

Robo-advisors may be seen as David compared to the Goliath number of traditional advisors, but they have just won new firepower. See who’s now supporting those upstarts.

New initiative supported by PayPal and others looks to bring financial services into the 21st century.

There’s big money being invested in financial technology these days. Two announcements this week, one in the U.S. and another in Canada, highlight the evolution taking place in financial services.

On Tuesday the Mars Discovery District announced that it was opening a FinTech cluster to support financial services start-ups in Toronto. The first tenant to move into Mars’ offices is Cryptiv, a firm providing a Bitcoin-related online wallet. Other financial technology companies involved with the cluster include Toronto-based robo-advisor WealthSimple and many more.

“The MaRS FinTech cluster will be Canada’s first dedicated financial technology cluster that will foster innovation in the space,” said Adam Nanjee, the head of this new cluster about the endeavour.

“The cluster will help startups grow, will connect the startups to the financial institutions, and will connect the investment community to everybody. And that will be done under one roof.”

It’s a big deal for Toronto and financial technology.

In 2013, an estimated $3 billion was invested in financial technology on a global basis. Toronto being the second biggest financial centre in North America, PayPal is naturally excited to be involved.

“This is a great opportunity for PayPal to partner with MaRS to help Canadian start-ups,” says Alexander Peh, head of market development and mobile at PayPal Canada. “Toronto has a unique opportunity to profit from its strength as a financial centre to also lead in technology leadership. We look upon our partnership with MaRS as the opportunity to raise the flag.”

The second piece of news advisors might want to take notice of is U.S. robo-advisor Betterment’s announcement yesterday that it has raised $60 million in growth funding from Francisco Partners, a leading private equity firm based in San Francisco, and existing investors such as Bessemer Venture Partners, who’ve already poured $45 million into the company.

Betterment manages $1.4 billion in assets which dwarfs any of its Canadian peers.

CEO Joe Stein said this about its progress:

“We’ve created a new product category over the last five years. While we’re excited with where we are today, we’re really just getting started. There are millions of people in need a better financial advice and services and we’re building the smartest technology and making it accessible to anyone.”

The debate rages about the usefulness of robo-advisors. Clearly, these two pieces of news when taken together indicate a movement is afoot.

Are full-service advisors using technology to its fullest in order to keep the dogs from the door?

We probably won’t know that answer until it’s too late. One thing is for certain — financial technology has never been more exciting than it is today.